Financial Accounting Report: Equity & Debt Analysis of Listed Firms

This report provides an analysis of the importance of regulating financial statements and standardizing them through regulatory bodies like the International Accounting Standards Board (IASB) and the Australian Accounting Standards Board (AASB). It highlights AASB's contributions to IFRS and explains why IFRS is not mandatory for member states. The report includes an analysis of four Australian listed entities, focusing on the equity and debt portions of their statements of financial position over the past four years. Key assumptions for the analysis include considering only interest-bearing liabilities, using consolidated annual reports, and focusing on gross debt. The analysis identifies and defines key terms related to equity, such as ordinary share capital, preference shares, reserves, and retained earnings, and presents a detailed breakdown of equity and capital gearing ratios for Azure Minerals, Azumah Resources, and AVZ Minerals, providing comments on their financial performance and debt positions.

Executive Summary..............................................2
Introduction...........................................................3
Answer-1(i)............................................................3
Answer-1(ii)...........................................................4
Answer-2 and 3.....................................................5
Conclusion..........................................................10
References:.........................................................11

CORPORATE AND FINANCIAL ACCOUNTING
Executive Summary
The document contains a brief description regarding the importance of regulation of financial
statement and the need for standardisation of the same by various regulatory authorities like
international Accounting Standard Board, Australian Accounting Standard Board etc;
In the second part, the document highlights about International Accounting Standard board and
Australian Accounting Standard Board and how AASB contributes to IFRS. The document also
mentions why IFRS is not mandatory on member states;
In the third part of the document, an analysis of four Australian listed entities have been carried out
with focus on equity and debt portion of statement of financial position

Introduction
The report is an analysis of the following major parts which includes the need for regulation of
financial statement and about AASB and IASB and contribution of AASB to IFRS and also the
analysis of equity and debt position of four Australian listed companies.
Answer-1(i)
In the first part, the documents deals with the importance of regulation of financial statement and why
the same shall not be left at the disposal of the management to disclose documents voluntarily. The
rationale behind the same has been detailed here-in-below:
(a) Standardisation
A standardised financial statement is easy to understand and comprehend for its user. It leaves
less scope for omission of content and proper presentation of facts and information.
(b) Comparability
A regulated Financial Statement shall be comparable with the other on account of similar
presentation by all the companies in the country. This is very useful for the end user who
wishes to compare different companies;
(c) Disclosure of complete and proper information
When financial statement are properly documented and regulated appropriate information shall
be available to user in a timely manner. Thus, the same shall be useful to end user of financial
statement. If the same is unregulated, it shall give space for cooking of books by the
management and shall provide incomplete information to the end user;
(d) Global Scams
History has witnessed that wherever regulation has failed or there is shortcoming in the same,
the world has witnessed big scams like Enron etc. There is always a need for regulation.
(e) Biased nature of management
When management is given an opportunity to report voluntarily, only those elements shall be
reported in the financial statement which are in favour of company and their own benefit.
History has affirmed the same.

Answer-1(ii)
In the second part of the report, the contribution of Australian Accounting Standard Board to
International Financial Reporting Standards has been highlighted along with rationale for not making
IFRS mandatory on its members.
Introduction
Australian Accounting Standard Board is a government body and regulator of financial statement in
Australia. The board is under the control of the parliament and is held accountable for maintain
accurate and timely reporting of financial statement in Australis.
International Accounting Standard Board (IASB) is set up in London. It is an independent regulatory
body engaged in setting up and expanding IFRS throughout the world.
Contribution of AASB
The main regulator body has been actively involved in implementing IFRS in Australia. The
contribution of the same has been detailed here-in-below:
(a) AASB funds IASB for its routine operations and workings;
(b) AASB coordinates with IASB on matters in areas of accounting and financial statement
preparation;
(c) AASB replies to draft questionnaire and other review articles Sending replies to any draft
questionnaire sent by IASB to its members for review;
(d) AASB on regular basis coordinates with IASB and raise issues faced and sent questions
regarding any scope for improvement;
(e) AASB has been in its continuous effort to align AASB with IFRS;
(f) AASB has adopted IFRS (Australian Accounting Standard Board, n.d.)
Rationale for non-compulsion of IFRS
IASB has not mandated IFRS on its members based on the following rationale: -
(a) IFRS is difficult in compare to traditional accounting;
(b) Absence of infrastructure in member countries;
(c) Traditional accounting prevalence;
(d) Implementation is time consuming ;
(e) IASB is a private body;
(f) Many jurisdictions are not ready for such adoption;
(g) Shortcomings and limitations of IFRS
(h) Implementation of IFRS shall require convergence with national standard.
(a)

Answer-2 and 3
Under the third segment of the document, an analysis of four Australian listed entities have been
carried out with focus on equity and debt portion of statement of financial position. The analysis has
been based on four Australian listed entities for past 4 years and is engaged in basis minerals. The
details of the companies along with name have been enumerated here-in-below:
(a) Azure Minerals;
(b) Azumah Resouces;
(c) AVZ Minerals;
(d) Australian Potash Limited.
Key Assumptions
The key assumption under the analysis have been detailed here-in-below:
(a) Only interest bearing liability has been consider in computation of financial ratios like debt
equity ratio and capital gearing ratio etc;
(b) Non-Current liability pertaining to Debt has been considered;
(c) Consolidated Annual report of past 4 years has been considered
(d) Gross debt has been considered i.e. the same has not been reduced by cash and other allied
instrument.;
(e) Revised Annual report has been considered.
Main Terms identified
The key terms that been identified under the equity have been defined here-in-below:
(a) Ordinary Share Capital or Issued Capital: The term ordinary means normal and the share of
these nature are the base of the company and are acquired by the founder and post IPO
general market. The holder of such shares carry substantive voting rights. No fixed rate of
return is provided to holder of such shares;
(b) Preference shares of different classes: Preference Shares are subordinate to equity shares
and they pay a fixed rate of return to investors;
(c) Non-current liability: These represent that portion of liability that shall be paid in period greater
than twelve months;
(d) Current Liability: These represent that portion liability that shall be due within twelve months;
(e) Converted Options: These are rights issued by the company to it personnel and are converted
to equity shares on vesting date.
(f) Reserves: They represent saving of the company to meet unforeseen situation and future
requirement.
(g) Notes: Instrument issued by company to raise money and may be converted to equity;

(h) Foreign Currency translation Reserve: This reserve is created to account for foreign exchange
difference at the time of consolidation of subsidiary in the books of parent under IFRS and
AASB
(i) Available for Sale Investment Reserve: This reserve is created to mark investment in books at
fair value.
(j) Option Reserve: These reserve are created to meet liability of options on vesting date;
(k) Cash flow hedging reserve: This reserve is created to meet any change is estimated cash flow
due to dynamic future.
(l) Non-Controlling interest: This represent the interest of minority shareholders in the company.
(m) Treasury Shares: This represent the shares that have been recalled by the company and is
known as purchase of own shares by the company.
(n) Dividend reinvestment: This means that instead of paying out of dividend by the company, the
company gives an option to equity shareholders to reinvest the same in the future prospect of
the company.
(o) Retained earnings: The term represent accumulated profit over the years
About the Company
Azure Minerals Limited is a listed entity on Australian Stock Exchange and is engaged in exploration
of minerals. The company marks its presence in different countries across the globe. (Reuters.com,
2018)
Equity Analysis
The break up has been provided here-in-below:
AZURE MINERALS LIMITED $ Mio
Sl
No Particulars 2017 2016 2015 2014
1 Equity 73.02795 65.581982
51.12156
9
47.9651
6
2 Reserve 3.37167 2.909495 3.063288
2.83805
3
3 Accumulated loss -59.8955
-
52.909974 -46.65659 -45.5052
4 Total Equity 16.5041 15.581503 7.528268
5.29798
7
(BDO Audit (WA) Pty Ltd,
2017)
Share Capital Break Up
Issued Share Capital
Sl No Particulars 2017 2016 2015 2014

1
Balance at the beginning of the
year
65.5819
8
51.12156
9
47.96516
3
44.6778
6
2 Share Issue 7.91617
15.15837
5 3.327683 3.9011
3 Share Issue Expense -0.47021 -0.697962 -0.171277 -0.63379
4 Option Exercised 0 0 0 0.02
5 Total
73.0279
5
65.58198
2
51.12156
9
47.9651
6
(Reuters.com, 2018)
Capital Gearing Ratio and Debt Equity Ratio
Gearing Ratio
Sl No Particulars 2017 2016 2015 2014
1 Debt 0 0 0 0
2 Equity
16.504
1
15.58150
3
7.52826
8
5.29798
7
3
Debt Equity
Ratio 0.00 0.00 0.00 0.00
4 Gearing Ratio 0.00 0.00 0.00 0.00
Comment
o Azure has been incurring losses over the years on account of poor financial performance and
market;
o The reserves generally include reserves like Foreign currency translation reserve, cash flow
hedge reserve and option reserve. The same has been increasing over the years;
o Azure is issuing fresh shares on account of its mounting losses;
o Azure is debt free and accordingly the computed ratios are nil;
o Poor performance coupled with bad credit rating is the reason for no debt.
o The company does not have any non-controlling interest.
Azumah Resources
Azumah is an Australian based entity engaged in exploration of minerals. The company has its vested
interest in Australia and Africa. The last trading share price on 27-09-2018 is 0.02 AUD.
(Reuters.com, 2018)
Equity Analysis
The break up has been provided here-in-below:
AZUMAH RESOURCES LIMITED $ Mio
Sl No Particulars 2017 2016 2015 2014
1 Equity 103.3616 98.337406 96.142775 94.68392
2 Reserve 5.67722 5.766968 5.476816 4.5896
3 Accumulated loss -107.134 -103.639823 -99.58498 -95.4359
4 Total Equity 1.90512 0.464551 2.034608 3.837653
(BDO Audit (WA) Pty Ltd, 2017)

Equity Break Up
Equity
Sl No Particulars 2017 2016 2015 2014
1
Balance at the beginning of the
year
97.7774
1
95.58277
5
94.12391
8
93.0464
2
2 Share Issue
5.78850
3 2.199971 1.458857 1.0775
3 Share Issue Expense -0.2043 -0.00534 0 0
4 Other Equity securities 0 0.56 0.56 0.56
Total
103.361
6
98.33740
6
96.14277
5
94.6839
2
(BDO Audit (WA) Pty Ltd, 2017)
Capital Gearing Ratio and Debt Equity Ratio
Gearing Ratio
Sl No Particulars 2017 2016 2015 2014
1 Debt 0 0 0 0
2 Equity 1.90512 0.464551 2.034608 3.837653
3 Debt Equity Ratio 0.00 0.00 0.00 0.00
4 Gearing Ratio 0.00 0.00 0.00 0.00
Comment
o Azumah has been incurring losses over the years on account of poor financial performance and
market which is in alignment with the industry ;
o The reserves generally include reserves like Foreign currency translation reserve, cash flow
hedge reserve and option reserve. The same has been increasing over the years;
o Azumah is issuing fresh shares on account of its mounting losses;
o Azumah is debt free and accordingly the computed ratios are nil;
o Poor performance coupled with bad credit rating is the reason for no debt.
o The company does not have any non-controlling interest.
AVZ Minerals Limited
AVZ is an Australian based entity engaged in exploration of minerals. The company has its vested
interest in Australia and Africa. (Reuters.com, 2018)
Equity Analysis
The break up has been provided here-in-below:
AVZ MINERALS LIMITED $ Mio
Sl No Particulars 2017 2016 2015 2014
1 Equity 33.656076 14.404348
13.99684
8
13.34011
5
2 Reserve 1.282448 0.790855 0.661078 0.642268

3 Accumulated loss
-
14.638812
-
12.956540 -12.479 -11.82438
4
Non - Controlling
Interest 10.771137 -0.197870 -0.195319 -0.192604
5 Total Equity 31.070849 2.040793 1.983604 1.965402
Equity Break Up
Issued Share Capital
Sl No Particulars 2017 2016 2015 2014
1
Balance at the beginning of the
year
14.40434
8
13.99684
8
13.34011
5
12.94108
3
2 Share Issue 20.6315 0.438 0.681854 0.428
3 Share Issue Expense -1.379772 -0.0305 -0.025121 -0.028968
4 Total
33.65607
6
14.40434
8
13.99684
8
13.34011
5
Capital Gearing Ratio and Debt Equity Ratio
Gearing Ratio
Sl No Particulars 2017 2016 2015 2014
1 Debt 2.543428 0 0 0
2 Equity 31.070849 2.040793 1.983604 1.965402
3 Debt Equity Ratio 0.08 0.00 0.00 0.00
4 Gearing Ratio 0.08 0.00 0.00 0.00
Comment
o AVZ has been incurring losses over the years on account of poor financial performance and
market which is in alignment with the industry ;
o The reserves generally include reserves like Foreign currency translation reserve, cash flow
hedge reserve and option reserve. The same has been increasing over the years;
o AVZ is issuing fresh shares on account of its mounting losses;
o AVZ has been debt free in past years and has now taken debt to fund its requirements;
o The ratios of the company are low on account of approx. no debt.
o Poor performance coupled with bad credit rating is the reason for low debt.
o The company does have non-controlling interest.
Australian Potash Limited
Australian Potash is an Australian based entity engaged in exploration of minerals. The company has
its vested interest in Australia (Reuters.com, 2018)
Equity Analysis
The break up has been provided here-in-below:

Australian Potash Limited $ Mio
Sl No Particulars 2017 2016 2015 2014
1 Equity 13.025831 7.446664 3.148896 2.756326
2 Reserve 1.202086 0.957405 0.1041 0.883405
3 Accumulated loss -14.523429 -7.713103 -3.085702 -3.210585
4 Total Equity -0.295512 0.690966 0.167294 0.429146
(Bentleys Audit & Coorporate (WA)Pty Ltd, 2017)
Equity Break Up
Issued Share Capital
Sl No Particulars 2017 2016 2015 2014
1 Balance at the beginning of the year 7.429753 3.131985 2.739415 2.176364
2 Share Issue 5.909678 4.676646 0.340114 0.526102
3 Share Issue Expense -0.330511 -0.378878 0.052456 0.036949
4 Other equity Securities 0.016911 0.016911 0.016911 0.016911
5 Total 13.025831 7.446664 3.148896 2.756326
(Bentleys Audit & Coorporate (WA)Pty Ltd, 2017)
Capital Gearing Ratio and Debt Equity Ratio
Gearing Ratio
Sl No Particulars 2017 2016 2015 2014
1 Debt 0 0 0 0
2 Equity
-
0.295512
0.69096
6
0.16729
4
0.42914
6
3
Debt Equity
Ratio 0.00 0.00 0.00 0.00
4 Gearing Ratio 0.00 0.00 0.00 0.00
Comment
o Australian Potash has been incurring losses over the years on account of poor financial
performance and market which is in alignment with the industry ;
o The reserves generally include reserves like Foreign currency translation reserve, cash flow
hedge reserve and option reserve. The same has been increasing over the years;
o Australian Potash is issuing fresh shares on account of its mounting losses;
o Australian Potash is debt free and accordingly the computed ratios are nil;
o Poor performance coupled with bad credit rating is the reason for no debt.
o The company does not have any non-controlling interest.
Conclusion
The above project assignment has helped me to understand key elements of equity and
contribution of AASB to IFRS and need for regulation of financial statements.

References:
Accounting Edu.org, n.d. What is Financial Accounting?. [Online]
Available at: https://www.accountingedu.org/what-is-financial-accounting.html
[Accessed 21 September 2018].
Australian Accounting Standard Board, n.d. What is AASB. [Online]
Available at: https://www.aasb.gov.au/About-the-AASB/Frequently-asked-questions.aspx
[Accessed 21 September 2018].
BDO Audit (WA) Pty Ltd, 2017. Annual Reoprt. [Online]
Available at: http://azureminerals.com.au/financial-reports/
[Accessed 28 September 2018].
BDO Audit (WA) Pty Ltd, 2017. Annual Report. [Online]
Available at: www.azumahresources.com.au/documents/1720684.pd
[Accessed 28 September 2018].
Bentleys Audit & Coorporate (WA)Pty Ltd, 2017. Annual Report. [Online]
Available at: https://www.australianpotash.com.au/site/PDF/1475_0/AnnualReport2017
[Accessed 28 September 2018].

Reuters.com, 2018. Australian Potash Ltd (APC.AX). [Online]
Available at: https://www.reuters.com/finance/stocks/company-officers/APC.AX
[Accessed 28 September 2018].
Reuters.com, 2018. AVZ Minerals Ltd (AVZ.AX). [Online]
Available at: https://in.reuters.com/finance/stocks/overview/AVZ.AX
[Accessed 28 September 2018].
Reuters.com, 2018. Azumah Resources Ltd (AZM.AX). [Online]
Available at: https://www.reuters.com/finance/stocks/overview/AZM.AX
[Accessed 28 September 2018].
Reuters.com, 2018. Azure Minerals Ltd (AZS.AX). [Online]
Available at: https://in.reuters.com/finance/stocks/company-profile/AZS.AX
[Accessed 28 September 2018].